42 CFR 422.384 - Financial plan requirement.
(b) Content of plan. A financial plan must include -
(1) A detailed marketing plan;
(2) Statements of revenue and expense on an accrual basis;
(3) Cash-flow statements;
(4) Balance sheets;
(5) Detailed justifications and assumptions in support of the financial plan including, where appropriate, certification of reserves and actuarial liabilities by a qualified actuary; and
(6) If applicable, statements of the availability of financial resources to meet projected losses.
(c) Period covered by the plan. A financial plan must -
(1) Cover the first 12 months after the estimated effective date of a PSO's MA contract; or
(2) If the PSO is projecting losses, cover 12 months beyond the end of the period for which losses are projected.
(d) Funding for projected losses. Except for the use of guarantees, LOC, and other means as provided in § 422.384(e), (f) and (g), an organization must have the resources for meeting projected losses on its balance sheet in cash or a form that is convertible to cash in a timely manner, in accordance with the PSO's financial plan.
(e) Guarantees and projected losses. Guarantees will be an acceptable resource to fund projected losses, provided that a PSO -
(i) Prior to the effective date of a PSO's MA contract, the amount of the projected losses for the first two quarters;
(ii) During the first quarter and prior to the beginning of the second quarter of a PSO's MA contract, the amount of projected losses through the end of the third quarter; and
(iii) During the second quarter and prior to the beginning of the third quarter of a PSO's MA contract, the amount of projected losses through the end of the fourth quarter.
(3) If the guarantor complies with the requirements in paragraph (e)(2) of this section, the PSO, in the third quarter, may notify CMS of its intent to reduce the period of advance funding of projected losses. CMS will notify the PSO within 60 days of receiving the PSO's request if the requested reduction in the period of advance funding will not be accepted.
(4) If the guarantee requirements in paragraph (e)(2) of this section are not met, CMS may take appropriate action, such as requiring funding of projected losses through means other than a guarantee. CMS retains discretion to require other methods or timing of funding, considering factors such as the financial condition of the guarantor and the accuracy of the financial plan.
(f) Letters of credit. Letters of credit are an acceptable resource to fund projected losses, provided they are irrevocable, unconditional, and satisfactory to CMS. They must be capable of being promptly paid upon presentation of a sight draft under the letters of credt without further reference to any other agreement, document, or entity.
(1) Lines of credit from regulated financial institutions;
(2) Legally binding agreements for capital contributions; or
(3) Legally binding agreements of a similar quality and reliability as permitted in paragraphs (g)(1) and (2) of this section.
(h) Application of guarantees, Letters of credit or other means of funding projected losses. Notwithstanding any other provision of this section, a PSO may use guarantees, letters of credit and, beginning one year after the effective date of a PSO's MA contract, other means of funding projected losses, but only in a combination or sequence that CMS considers appropriate.